PayPal eyes 7 million retail locations in Discover deal

SAN FRANCISCO, Wed Aug 22, 2012 – Online payments provider PayPal will gain access to millions of physical stores in the United States under an agreement with Discover Financial Services.

Under the deal, unveiled on Wednesday, PayPal will issue payment cards to its more than 50 million active users in the United States next year.

The cards will let PayPal users buy from merchants that already use Discover Network, a payment network with more than 7 million U.S. retail locations.

PayPal, a unit of eBay Inc., is expanding into the physical world, in search of new opportunities. In the past year, the company has signed up more than 15 retailers, including Home Depot and Office Depot, to accept PayPal payments in their stores.

Adding PayPal to Discover’s network is a big boost for the initiative, according to Ken Paterson, a director at Mercator Advisory Group, a research firm that focuses on the consumer payments industry.

“It’s a big step for both companies,” Paterson said. “This would provide a ready-made route for PayPal to get into most card-accepting retail establishments in the U.S.”

For Discover, PayPal’s large user base could become a significant source of extra transaction volume for its payment network, he added.

PayPal users will be able to pay at merchants on the Discover Network by swiping their new cards through existing check-out machines and entering a four-digit PIN, the companies said.